Clark v. Rosario Min. & Mill. Co.

• Decision Date: 21 February 1910
• Docket Number: 1,770.
• Parties: CLARK v. ROSARIO MINING & MILLING CO. [1]
• Court: U.S. Court of Appeals — Ninth Circuit

176 F. 180

CLARK v. ROSARIO MINING & MILLING CO. ^[1]

No. 1,770.

United States Court of Appeals, Ninth Circuit.

February 21, 1910

The appellee was the complainant in this suit, the defendants being the appellant, Clark, who was the principal defendant Frank L. Sizer, the theretofore confidential mining expert of Clark, and William Falconer, as the administrator of the estate of Edward L. Whitmore, deceased, who, during the times in question, was Clark's private secretary and confidential agent. The suit was for the specific performance of a written contract made May 1, 1902, between the appellee named therein as the party of the first part, and Clark Whitmore, and Sizer, named therein as parties of the second part, concerning certain mining property known as the 'Rosario Mine,' situated in the state of Chihuahua Mexico, specifically described in the bill. The respective parties had previously entered into two other contracts respecting the same property, which are referred to in the contract of May 1, 1902, as follows:

'Whereas, on December 12, 1900, the parties hereto entered into a contract whereby the second parties were given an option to purchase said properties for $800,000, and bound themselves to do certain development work upon said property, and the treatment of the ores thereof, including stipulations binding the second parties to repair and improve said property and appurtenances, in the way of building and machinery thereof, and, in case of the failure of the second party to exercise their option and buy the property, then all such improvements and machinery and appliances as the second party should put upon the property should become the property of the first party without cost or expense; and, whereas, on the 12th day of August, 1901, said contract was extended so as to continue said option until May 1, 1902, and the second parties again bound themselves to continue the possession and development of said mine, and a proper treatment of the ores thereof until May 1, 1902; and, whereas, in each of said contracts said second parties bound themselves to examine the titles to said mining property and other property above described; and, whereas, said second parties by said contracts bound themselves to make reports and maps of said property, to be furnished to the first party, and showing the extent of the working upon and value of the said property and its ores, treatment, and tests thereof; and, whereas, the said second parties have, after examination of said property and the titles thereto, notified the first party that the second party is satisfied that the titles to said property are in the first party; and, whereas, the second party has notified said first party that they will not exercise their said options to buy said property at the price of $800,000 but have offered to the first party to buy the said property at the price of ($400,000) four hundred thousand dollars cash (American gold); and, whereas, the first (party) has refused to accept said offer; and, whereas, said option of the second parties to purchase said properties has expired, and the first party has become and is entitled to the possession of said property, together with all of the improvements, repairs, machinery, materials, tools, equipments, and betterments placed thereon by the second party, excepting current supplies of wood, groceries, chemicals, and unused hardware supplies, and entitled to the maps and complete report upon said property provided for in said contracts, which map and reports have not been furnished to the first party; and, whereas, it is the desire of each of the parties to further develop said property by the development work hereinafter stipulated, to the end of more certainly determining the value of said property, so that the first party may be able to sell the same to the best advantage to any purchaser which it may find, and, in the event of a sale at a figure above $600,000 to other parties, that the first party will out of such proceeds compensate the second parties in part for the expenditures they have made in development of said property as herein provided; and, whereas, in order to carry out this arrangement and purpose, and to afford the second parties an opportunity to buy said property at the price of $600,000 in the event of a failure of the first parties to make a sale of said property during the life of this contract at more than $600,000, and to afford, the second parties a preference right to buy said property at the price of $600,000 as herein stipulated; and, whereas, it is necessary to keep said property open and the operating plant in operation; and, whereas, the second parties, as a consideration in part for this option contract, are desirous of keeping open said offer to buy said property at the price of $400,000, subject to the right of the first party to accept the offer at any time during the life of this contract:

'Now, therefore, it is hereby mutually agreed between the parties hereto as follows:

'(1) The second parties offer to the first party to buy from the first party said property, and to pay to the first party therefor the sum of ($400,000) four hundred thousand dollars, American gold, at Ft. Worth, Tex., and to make said payment within thirty days after being notified of an acceptance by the first part(y) of said offer; provided, however, that if the said offer is accepted within the next four months the second party shall have until September 1, 1902, to make such payment, the first party concurrently or as near as may be with such payment to cause to be transferred to the second parties the titles which the first party through its directors or otherwise has in and to said property; and the second parties agree to leave said offer open for one year from this date, subject to the acceptance of the first party at any time during said year. Said titles having been examined by the second parties, it is agreed that the same are good and sufficient.

'(2) The first party, reserving the right to sell said property and contract with reference thereto to other parties, gives and grants to the second parties an option to buy said property at the end of the said year, to wit, on May 1, 1903 (said option to be then exercised or forfeited), at the price of $600,000 cash or its equivalent, American gold, provided the first party shall not have sooner sold said property, or made a bona fide contract to do so; and provided, further, that before making any offer to sell said property at $600,000 or less to other parties the first party shall give to the second parties a preference right to buy the same at said price so offered to others, and to that end shall notify the second parties of such contemplated sale or offer, and the second party shall promptly exercise its performance (preference) right upon being so notified and afforded an opportunity to do so, and shall have 30 days after electing to take the property in which to make the payment for the property, whereupon concurrently or as near as may be the first party shall cause said property to be conveyed to the second parties.

If the second parties, upon being so afforded an opportunity to exercise such performance right to purchase, shall fail to do so, then such right shall cease.

'(3) The first party, reserving full rights to make any sale it may choose of said property during the year, agrees that if during the year up to May 1, 1903, the first party shall sell said property or make a valid contract of sale thereof to other parties, resulting in a sale of the same at a price greater than $600,000, it shall pay to the second parties $50,000 out of the excess of the purchase price above $600,000, except that if such excess does not amount to $50,000, then such amount as the purchase price upon such sale shall exceed $600,000; provided that, if the purchase price upon such sale shall not exceed $650,000, the second parties shall have the preference right to take the property at the price of $600,000; provided also, that in the event of a sale to other parties, partly on a credit, the payment of the $50,000, or the excess over $600,000, if less than $50,000, if under this contract the second parties shall become entitled to it, shall be apportioned among the time payments of the purchase money upon such sale, in proportion as it shall bear to the whole; provided, however, that not less than one-half of the amount to which the second parties shall be entitled shall be paid out of the first cash payment.'

The contract in suit then provided for the right of free access to the mine by the first party thereto, and its appurtenances, including all books and records of its operation, and required the parties of the second part thereto to remain in possession of the property, and at their own expense to operate it until May 1, 1903, unless sooner sold, and, during the first 90 days from the date of the contract in suit, to perform certain specified work in and about the mine, and during that period of 90 days to pay to the first party 20 per cent. of the gross bullion output from the mine, mill and cyanide, or other reduction plant, and to operate the mill to its full capacity, and then provided that:

'After the end of the 90 days or the completion of said work, if sooner completed, the second parties shall, at the option of the first party, continue the operations of the mill and cyanide plant and to keep the mine unwatered and for the purpose of paying expenses shall have the bullion output of the said mill and cyanide plant, and if the output shall exceed such expenses then the excess shall be paid to the first party as royalty, but no other royalty shall be paid out of such output, but the ore so worked during that time shall

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